President Donald Trump’s tariffs on goods from U.S. trade partners are already showing signs of driving up new home prices.

During the first half of April, the president has launched a series of sweeping levies intended to eliminate the American trade deficit. Immediate effects included a massive stock selloff and more bond buying, leading to concerns over potential economic fallout, job losses, and increased costs, especially in industries reliant on global supply chains, including homebuilding.

About 70% of lumber and drywall gypsum used in residential construction is imported from Canada and Mexico, respectively, according to industry data. China is a source of some fixtures and finishes used in homes, though it is a less significant player in the homebuilding supply chain.

In addition to the increased cost of materials, higher tariffs could also influence broader economic trends, including mortgage rates. Fannie Mae is now predicting the 30-year fixed mortgage rate to average 6.8% throughout 2025, an increase from earlier forecasts.

It should be noted that the implementation of the tariffs had an initial opposite effect. With traders make an immediate run to safer haven bonds, mortgage rates began falling.

The potential for retaliatory tariffs from major trade partners including China and the European Union stokes fears of inflation and a potential recession.

Fannie Mae recently revised its forecast for existing-home sales in 2025, predicting a 22% decline compared to pre-pandemic levels. The situation is still fluid, but it's clear that both tariffs and higher borrowing costs will play a significant role.